A porfolio consists of the following nine bonds: 1. Reynolds Amern 2. Donnelley RR 3. Altria Group 4. Alcoa Inc 5. Aetna Inc 6. KLA Tencor 7. Hospitality PRO 8. GE Capital 9. Sempra Energy Part A: 1. For each of the bonds listed above, find the coupon rate, payment date, rating, years to maturity, yields to call,
1-Is a dollar worth more today than tomorrow? Why or why not? What is the relationship between present and future value? 2-What effect does an organization's bond rating have on its cost of capital? What are some factors that affect a corporate bond's value? Why is it necessary to value a bond in terms of today's dollars? What is the effect of an increase in the prevailing interest rate on the valuation of a bond? What is the relationship between interest rates and bond prices? 3- Should an organization have more debt or more equity in its capital structure? Explain your answer. What are some limitations of utilizing debt instead of equity in the capital structure? 4- What effect do fixed costs have on an organization's operating leverage? Under what market conditions should financial leverage be emphasized? What is the danger of being a highly leveraged organization?
1-Is a dollar worth more today than tomorrow? Why or why not? What is the relationship between present and future value? 2-What effect does an organization's bond rating have on its cost of capital? What are some factors that affect a corporate bond's value? Why is it necessary to value a bond in terms of today's dollars? W
The market trades a default-free zero coupon bond that pays $100.00 in one year. This bond trades at $94.34. Also traded is a coupon bond that pays a coupon of $4:00 after six months, and makes a final payment of $104:00 (the last coupon and the principal) in one year. This bond trades at $102:00. Moreover, a six month zero-coup
Jackson Corporation's bonds have 12 years remaining to maturity. Interest is paid annually. What is the current market price of these bonds?
Jackson Corporation's bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 8%. The bonds have a yield to maturity of 9%. What is the current market price of these bonds?
The contributors of capital and the respective share of the balance sheet for a company are this: 33.3% common stock with an expected return of 15% 33.3% preferred shareholders with a 9% expected return 33.3% bondholders with a yield to maturity (YTM) of 6% A corporate tax rate of 40% What is the weighted average cost
Suppose that 6 month, 12 month, 18 month, 24 month, and 30 month Zero rates are 4%, 4.2%, 4.4$, 4.6%, and 4.8% per annum with continuous compounding respectively. Estimate the cash price of a bond with a value of 100 that will mature in 30 month and pays a coupon of 4% per annum semiannually. The bond pays $2 in 6, 12, 18 and
Please assess the concepts and measurements of GDP, the business cycle, unemployment, inflation, and interest rates. Provide at least three specific examples. Thanks for the help with this...
What should investors do when rates are increasing short-term and matured bonds? When rates are falling, long-term bonds will have capital gains from market price increases, so what would be a defensive strategy? While many investors may devise low risk strategies and strategies to mitigate risks, upheavals can catch even
I. The Sampson Company issued a $1,000 bond 5 years ago with an initial term of 25 years and a coupon rate of 6%. Today's interest rate is 10%. 1) What is the bond's current value if interest is paid semiannually as it is on most bonds? 2) What is the value of the bond if the bond's interest is paid annually? II. Assume th
1. The yield to maturity for 15 year bonds is as follows for four different bond rating categories. Aaa 9.4%...........................Aa2 10.0% Aa1 9.6%..........................Aa3 10.2% The bonds of Falter Corporation were rated as Aa1 and issued at par a few weeks ago. The bonds have just been downgraded to Aa2. Determin
In some industries, competition can take the form of price wars. When this occurs, supply is greater than demand and prices usually come down to attract customers. Healthcare providers compete for consumers, but healthcare costs continue to rise. What may explain this?
A bond currently sells for $875. It has a 7-year maturity, an annual coupon of $75, and a par value of $1000. What is its yield to Maturity? What is its current yield?
The income of a bond is a major variable in the bond valuation equation. Bond Yields are also widely quoted in business journals as tools to compare various securities on income streams and total return. A bond currently sells for $875. It has a 7-year maturity, an annual coupon of $75, and a par value of $1000. What
Northern Electric has many bonds trading on the NY Stock Exchange. Suppose NEs bonds have identical coupon rates of 8% but that one issue matures in one year, one in 5 years and the third in 10 years. Assume that a coupon payment was made yesterday. a. If the yield to maturity for all three bonds is 9%, what is the fair
What would you be willing to pay for a $1,000 bond paying $70 interest at the end of each year and maturing in 25 years if you wanted the bond to yield the following rates of return? a. 5 percent b. 7 percent c. 12 percent (Note: At maturity, the bond will be retired and the holder will receive $1,000 in cash. Bonds are ty
Finance: Cost of loan, net credit position, present value of settlement, debt yield, YTM for bonds, after tax cost of debt, capital structure
1) Talmud Book Company borrows $16,000 for 30 days at 9% interest. What is the dollar cost of the loan? Dollar cost of loan = Amount Borrowed X interest Rate X Days loan is Outstanding/ Days in the year (360) 2) McGriff Dog Food Company normally takes 20 days to pay for average daily credit purchases of $9,000. Its
A 20-year, 8 % semiannual coupon bond with a par value of $1,000 may be called in 5 years at a call price of $1,040. What is the bonds yield to maturity?
A 20-year, 8 % semiannual coupon bond with a par value of $1,000 may be called in 5 years at a call price of $1,040. The bond sells for $1,000. (Assume that the bond has just been issued.) a) What is the bonds yield to maturity? b) What is the bond's current yield? c) What is the bond's capital gain or loss yield? d) Wha
A new client, Dr. Washington, has demonstrated a particular thirst for knowledge of stocks and bonds and has asked that you put together an example of these investments to illustrate how they work. Calculate the returns on the following investments (include the US$ and percent) to illustrate how they work. 1. A stock that does
Please see attachment for proper format of problems. P6-25 Bond valuation-Semiannual interest. Calculate the value of each of the bonds shown in the following table, all of which pay interest semiannually. Bond Par Value Coupon interest rate Year to maturity Required annual return A $1,000
See attached file for proper format of template. Profitability and Returns. The assignment requires that I consider whether this is a good investment, by comparing it with investing in a bond fund. I will need to graph the opportunity set, calculate the weights, expected returns, variance and standard deviation in the at
Please explain how you get answers and don't use PV in Excel. Attached also are PV tables. 2. Bell Company sells $2,400,000 of 6% bonds on June 1, 2010. The bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2014. The bonds yield 5% On October 1, 2011, Douglas Company buys back $72
See attached file. Please illustrate all calculations in the yellow table below from the Excel file. Please build the formulas in the Excel sheet. Dragon Breweries (DB) has the following balance sheet: Dragon Breweries ($ in millions) Fixed assets $200,000,000 Short-term debt $20,000,000 Long-term debt $80
What is a long-term bond? What are some examples of long-term bonds?
A corporate bond with a face value of $1000 matures in 4 years and had an 8% coupon paid at the end of each year. The current price of the bond is $932. What is the yield to maturity for this bond?
Question: You buy an 8% annual coupon bond that has a 15 year maturity and a required return of 12%. The par value is $1,000. You sell the bond five years later when the required return is 10%. What is the beginning (buy) price of the bond?
Your financial advisor tells you that you can earn 15% this year on a junk-bond investment. You anticipate that the inflation rate will be 2.8% over the same year. By how much will your purchasing power increase? 11.87% 7.95% 8.46% 1.12% 9.56%
I am truly stumped! I have tried to understand bond valuation and cannot for the life of me. I need to fill in the answers in the gray cells based on the information provided up top in the spreadsheet.
Seven years ago, Goodwynn & Wolf Incorporated sold a 20 year bond issue with a 14% annual coupon rate and a 9% call premium. Today, G&W called the bonds. The bonds originally were sold at their face value of $1,000. Compute the realized rate of return for investors who purchased the bonds when they were issued and who surrender
1. Par value of a stock refers to the: A) Issue price of the stock. B) Value assigned to a share of stock by the corporate charter. C) Market value of the stock on the date of the financial statements. D) Maximum selling price of the stock. E) Dividend value of the stock. 2. Preferred stock on which the right to
4. On January 1,2009, a company issued and sold a $400,000, 7%, 10-year bond payable, and received proceeds of $396,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is: A. Bond Interest Expense
1. Valuing Bonds What is the price of a 10-year, zero coupon bond paying $1,000 at maturity if the YTM is: a) 5 percent? b) 10 percent? c. 15 percent? 2. Interest Rate Risk The Faulk Corp has a 6 percent coupon bond outstanding. The Gonas Company has a 14 percent bond oustanding. Both bonds have 8 years to maturity,